Credit growth expected to increase from Q2

24-Mar-2021 Intellasia | Dau tu Chung khoan | 12:01 AM Print This Post

According to annual statistics, credit usually increases slowly in the first quarter (Q1), then gradually goes up and reaches the peak in Q4. Thus, with the move to raise deposit rates of some banks recently, it is said that banks are preparing liquidity to meet the rising demand for credit.

However, deputy director of the State Bank of Vietnam (SBV) HCM City branch assessed that this is not the general uptrend of interest rates in the market, but only local in a few banks. In fact, in the week of March 8th 15th 2021, many banks lowered their savings interest rates by 0.1 0.2 percentage point. The rate for one-year term is around six percent per annum.

Saigon Securities Incorporation (SSI) forecasted that the savings interest rate level will remain low by the end of June and slightly go up when credit gets better. Meanwhile, Vietcombank Securities Company (VBSC) said that there is some room to further cut lending interest rate level in the context when savings interest rates have significantly been reduced in the past year.

Statistics of the SBV HCM City branch showed that in the first two months of 2021, the capital mobilisation of banks in the city increased by 0.3%, and credit growth was 1.5 percent compared to the end of 2020. In Hanoi, the socio-economic situation report in February 2021 of the general Statistical Office pointed out that in the first two months of the year, credit growth in the area was 0.6%.

General director of a private joint stock bank said that in Q1, the demand for capital of customers is not high, because production and business projects are often not started in this period. Since the credit grows slowly, the banking industry is likely to keep interest rate level low. In addition, as inflation has not shown signs of surging and is still under control, both lending and savings interest rates are unlike to go up.

The SBV often uses the credit growth figure of banks in the end of 2020 to assign credit growth target for 2021. However, the agency uses the average growth rate in order to be close to the actual situation.

Some banks are assigned credit growth limit for Q1 2021 at three to four percent compared to the end of 2020. The leaders of these banks share that the SBV’s quarterly credit growth limit allocation does not put pressure on the bank.

Dr Can Van Luc, a banking and economic expert, recommended that in the long term, the SBV should consider removing the administrative management on credit and shift to managing according to Capital Adequacy Ratio (CAR), instead of administering credit growth limit as currently, as very few countries around the world use this method.

In the business plans to be submitted at the Annual general Meeting of many banks, the targets, including credit growth, are expected to continue to grow positively.

For example, Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank) aims at a pre-tax profit of 25.2 trillion dong this year, up by 12%; mobilisation growth in market 1 of eight percent; credit growth of 12%; and bad debt ratio of less than one percent.

Military Commercial Joint Stock Bank (MB) targets a pre-tax profit growth of 25 30%, reaching 14.6 trillion dong; and bad debt ratio of the consolidated bank of less than 1.3%. The bank strives to expand credit at the highest level as allocated by the SBV’s assigned limit.

For Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank), the profit growth target in 2021 is set at 10 20 percent and bad debt ratio target is less than two percent. The bank’s Chair Le Duc Tho said that the bank expects a credit growth of eight to 11%, depending on the actual situation of the market and the monetary policy management of the authority.

The SBV said that the credit growth target of 12 percent of the industry is not a fixed number that credit institutions must comply with. The agency will adjust the target when necessary. Leader of many banks expect the credit growth to gradually go up in the coming quarters. In the short term, banks focus on lending to essential production and business areas, agricultural and fishery sectors, etc.

 

Category: Finance, Vietnam

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